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Well I was assuming you were talking about a traditional IRA since you mentioned getting a tax credit from your state. Also, if you have a large footballguy income then a Roth contribution is not allowed if you are maxing out your 401k.
Yeah we don't qualify for a Roth IRA. I mentioned I do not get a tax credit from my state. So this only works with a Roth IRA? Thanks for clearing it up.
I still wouldn't recommend but I think doing some research makes sense. If you are high tax bracket perhaps some tax free munis would make sense.
Thanks I will check out the munis as we are in the top tax bracket.
My biggest gripe about a 529 is the lack of investment options. However, I like the Roth like earnings feature and the ability to transfer funds to another child or family member if the designated child does not go to college or gets a scholarship. If you have multiple kids the 529 looks pretty attractive.
I have multiple kids. But they are twins so the luxury of being able to switch it to the other kid is a little tougher when they will be going to college at the exact same time.
That's not a guarantee. I have twins and they went two different directions. One is in the Marines and the other is just now thinking about college. They turn 20 this fall.
This was my plan. With my first one on the way. Have a large amount in cash right now that needs to be liquid but in a year or so i think my plan will be to backdoor roth and not fund a 529. Once my retirement is straight, then ill decide whether to pay for their college or pay off their loans. but ive been meaning to toss this by an advisor so.The astute financial advisors say don't pay for your kid's education. Put me in that camp. If anything have them pay the first two years, I know many who have thrown money down the drain on unmotivated kids. The motivated ones are getting scholarships, just sayin. I was one of those unmotivated ones so I know.
Keep your emotions and your financial decisions separate.
Your questions are basic - I wouldn't waste money on an advisorThis was my plan. With my first one on the way. Have a large amount in cash right now that needs to be liquid but in a year or so i think my plan will be to backdoor roth and not fund a 529. Once my retirement is straight, then ill decide whether to pay for their college or pay off their loans. but ive been meaning to toss this by an advisor so.
Short Answer: Only the contributions can be withdrawn tax/penalty free.
No, yes, no. Mr MM is a bit of pretentious jerk, IMO. Not too interested in reusing toilet paper, etc. MF is very, very good - good articles with substantial impact on how to make retirement savings grow faster or last longer. Haven't read much of the other, but will look at it. I also happen to like Root of Good and Financial Samurai - informative sites.
For education, earnings can be withdrawn without penalty, but you have to pay income tax which will take out a nice chunk.
Earning are tax free. Maybe some state tax credits/deductions. If you're thinking aid, they ding you a lot less for a 529 then general income or money from a roth.
I agree with you on MMM, but he posts some interesting things occasionally. Choose FI is a podcast, not sure how much is actually on their site. I'll check out the two sites you mentioned, thanks.
ChooseFI is a decent podcast. I think they get preachy like MMM too, I'm not sure why so many of these FI bloggers assume that the only reason people buy nice things is because they want to impress others. But overall I like it because it motivates me to save. I don't agree on everything they talk about, but they do have some good actionable information -- particularly the travel rewards hacking.
They can seem a bit preachy but one thing they've said multiple times is it's ok to spend money on things you value. They're against the thoughtless spending on every new widget that comes out, a problem most Americans have and then wonder why they're broke.
I've really enjoyed the content coming out of: www.earlyretirementnow.com ... the series he put together on SWR (safe withdrawal rate) is high quality stuff.Sand said:
Congrats. Do you find yourself making trade offs to meet that number? We've spent so much time and energy saving for retirement the last 5-10 years that I feel we may miss out on things or choose to take the cheapest option. There was some posts awhile back poking fun at Dentist for his lifestyle. I don't think his would be a good comparison because 40% of $150k still leaves plenty to live on. But if someone is making half that, it starts to come down to choosing between saving and living.CR69 said:
That's a good one. I'll add on another couple:
At first it was a little tough, but not at all now. We've both come to realize that sacrifices we make for the next 10-15 years is worth it if that allows us to retire early and start really enjoying our lives. I have a fairly stressful job that doesn't provide a lot of work/life balance but pays well (loan officer).
Our situation might be different than yours but our local community college isn't much cheaper than the local university and the University is better. If your point is to encourage them to go inexpensive and live at home for a couple years, instead of feeling like they NEED to live in overpriced dorms, agreed. Oops, I must have read some bad info. It is a lot cheaper. Just not as good.
I get what you're saying, but I won't "send my kids" anywhere. They're going to have to choose after thoroughly discussing the options. I'll definitely encourage public school. Between Auburn, Alabama - Tuscaloosa, UAB and UAH, they have good options in state.
we're nowhere near 40% now (about 20%) but completely agreed. It's mostly about habit. Changing habits can be tough but once you've established those habits it's not hard.
Something I've noticed (and mentioned about my parents) is it's hard to break those habits. When you live a frugal life for 20 years, you don't suddenly become spendy.
The astute financial advisors say don't pay for your kid's education. Put me in that camp. If anything have them pay the first two years, I know many who have thrown money down the drain on unmotivated kids. The motivated ones are getting scholarships, just sayin. I was one of those unmotivated ones so I know.
Keep your emotions and your financial decisions separate.
I think I've mentioned it before here but that's part of our plan. We might match but they'll pay part at least.Sure, but I highly doubt I'll ever wish we had spent more money on ourselves. We want to travel more but with 5 kids the biggest limitation isn't money.
There are a couple decent community colleges is reasonable driving distance from our house, and they are considerably less expensive. I do not have the exact numbers, but I remember looking last year and the tuition was less than half, maybe 1/3, of the state schools.
Oops, I was apparently using bad info.
Helping you out here, GB.
Well, yeah, the biggest limitation is 5 KIDS.
I was a Tide fan even when I lived in Michigan. 
Someone can correct me if this is incorrect, but I think it's the only financial tool where you get a tax break on the deposit (state only I believe), it doesn't get taxed as it grows, and you can pull it out tax free as well.
HSA is triple-tax-free federally (ETA - assuming a qualified withdrawal, of course).
I don't really worry about money though. I just prioritize my spending on what brings me happiness now. I do weigh everything against what that money could mean in the long run, but I certainly don't feel like I'm depriving myself. We budget $500 a month for travel, which is quite a bit when you combine that with travel hacking.KCitons said:
People may utilize some slow transfer time based methods to move from assets from one class to another (to mitigate risk I assume), but from a purely mathematical perspective if you expect the S & P to earn 8% and your company stock to earn 5% going forward (all for example purposes) you should just move it all to maximize your return. Unless you know exactly how each will behave, in which case time it perfectly for when you expect your company stock to start performing worse.
Typically you would want to rebalance immediately but moving out of one individual stock could be a different story. If the stock is more volatile, I'd move it all now. Otherwise you're just trying to time the market.
He is de-risking and part of that is the psychological impact of throwing all that money all at once into the general market. Nugget - what's the volatility of your company stock? Higher or lower than the markets? If higher I might do larger chunks sooner to de-risk. If lower or the same stick with the plan. In general, though, the thought Nugget has of dollar cost averaging in (and out) is fine, IMO.
How much would it 'burn' you if you transferred the money and the next week the stock rose 25%?
